Poised for production
Oil, natural gas explorers eyeing untapped Lampasas County reserves
By DAVID LOWE Staff Writer

PHOTO BY DAVID LOWE The Wynne No. 1 well, one of seven Scully Energy Corp. has drilled in Lampasas County, stands on a hill at Ray Don Clayton's property off Big Divide Road. Scully Energy plans to finish drilling the well within two weeks and continues to seek a pipeline for natural gas.

Few people think of Lampasas County as oil or natural gas country. Drilling efforts near Copperas Cove may change that perception.

Scully Energy Corp., a Saladobased company, has concentrated its efforts in Coryell and southeast Lampasas counties, drilling 17 wells. Of seven wells drilled in Lampasas County, six are ready for connection to a natural gas pipeline -- once energy explorers find suitable infrastructure.

Scully Energy is focusing on natural gas, but oil discovery looks promising too, geologic consultant John Sobehrad said.

"We haven't found it yet, but we're real close," said Sobehrad, owner of Geo-Logic.

Sobehrad contacted Central Texas native Noel Scully, chief operating officer of Scully Energy's parent company, Salado Oil Co., to offer his consulting services as the Salado man began organizing drilling in Coryell and Lampasas counties. Scully already had completed five "wildcat" wells -- those located far from existing production -- when Sobehrad called.

GRAPHIC COURTESY OF GEO-LOGIC Scully Energy Corp., a Salado-based company drilling near Big Divide Road, last year discovered the Texas Oil and Gas (TOGA) field, Lampasas County's first commercial oil and gas field. Represented as a circle in the center of the state at the southern extreme of the Fort Worth Basin, the TOGA field contains as much as 65 billion cubic feet of recoverable natural gas.

"He's always wanted to find production in this area," Sobehrad said.

The Central Texas company plans between 50 and 100 wells in the next five years.

Scully Energy's wildcats stand more than 30 miles away from the point of closest production, Pottsville Field in Hamilton County. Historically, only about one in 10 wildcats yields commercial production, but Sobehrad believes as many as seven of the Salado company's 17 wells will produce.

Energy explorers still need a pipeline, he said. An Atmos Energy pipeline on U.S. Highway 190 ends at the east side of Copperas Cove, six miles from drilling in Lampasas County near Big Divide Road.

After a year of negotiations with BNSF Railway failed to yield an easement agreement, Scully Energy is considering tying in to north-south line in Lampasas, Sobehrad said.

"We're looking for different options in moving forward with gas," said the consultant.

The Salado-based company also needs to find a distributor to purchase any natural gas extracted from Copperas Cove-area wells. Scully Energy already has searched a year for a buyer.

Scully Energy last year discovered the Texas Oil and Gas (TOGA) field, Lampasas County's first commercial oil or gas field, in the southeast end of the county. With as many as 65 billion cubic feet of recoverable natural gas in the TOGA Cisco Strawn and TOGA Scully Strawn reservoirs, Scully Energy believes it can pay the $4 million to $5 million it will invest in a pipeline.

Along with hydrocarbons in the Strawn reservoirs, Scully Energy found "significant oil and gas shows in the Atoka-Bend, Marble Falls and Ellenburger formations," Sobehrad and geophysicist Ralph Dozier wrote in an article published Aug. 27 in the Oil and Gas Journal.

Lampasas County has seen limited oil and gas exploration before. Ray Don Clayton, whose family is leasing about 300 acres off Big Divide Road to Scully Energy, said the Claytons received small payments for natural gas exploration on their land when they purchased the property in 1962.

The Susman/Gotcher No. 1 well, drilled in 1949, especially interested Scully Energy officials.

"We knew that site had some potential," Sobehrad said of the Gotcher property, north of the Clayton family land.

The Susman/Gotcher well went only 1,450 feet below ground, so drillers penetrated just the upper portion of the Strawn group, according to Sobehrad and Dozier's article. Low gas prices and lack of infrastructure eventually caused the well to be plugged.

Energy prices at mid-century forced geologists to concentrate on formations capable of producing 1,500 to 2,000 barrels of oil per day. Because prices have risen, companies now can cover their costs and make a profit with as little as 100 barrels of daily production, Sobehrad said.

Drilling wildcat wells does involve substantial risks, as many turn out dry. Even the supposed failures, however, help future explorers avoid the mistakes of the past.

"Dry holes can tell you a lot of information," Sobehrad said. "A dry hole doesn't scare me."

Unsuccessful earlier attempts can tell drillers where not to position rigs on properties geologists know contain hydrocarbons. Scully Energy drilled its Scully/ Gotcher No. 1 well offset to the 1949 Gotcher No. 1 well, for instance.

Geo-Logic keeps a well log of electronic data on all properties located within an oil and gas field. Porosity and resistivity tools measure how easily electric currents pass beneath the surface of the earth. Underground saltwater conducts electricity, but formations resistant to an electric current hold promise for oil or gas discovery.

"If you've got high porosity, high resistivity, chances are you've got a productive reservoir," Sobehrad said.

Geologists also send seismic impulses below the ground to generate a computerized "pseudocross section of the earth," the consultant said. Researchers continually update their maps as they work in a hydrocarbon field.

"Every well gives me new information," he said.

Area geologists often share information, but Sobehrad and Salado Oil have done much of the research themselves because they are working in a previously undeveloped field.

"It really takes a major effort, which Salado Oil is doing," said Tony Miller, the company's "landman."

Lease agreements come first, and with many property owners involved, finalizing terms often becomes a complicated process. Miller has concluded lease agreements for about 10,000 acres in Lampasas County and surrounding entities. The land official signed 25 lease agreements on the Gotcher property because numerous heirs will receive payments.

"You end up dealing with a lot of property owners," Miller said.

Companies typically pay a peracre lease price comparable to a grazing lease for the option to come on a landowner's property. An agreement often runs two to three years, and mineral rights owners earn royalties if wells produce oil or natural gas.

"That's the key to the whole thing," said Clayton, whose family owns minerals at other property besides the Big Divide land. "That's one of the things people don't really realize."

Landowners who don't own the minerals on their property may have no control over drilling, either, if the mineral owners want companies to put in wells. State property law reflects Texas history and economic development, Clayton said.

"The state of Texas was built on oil, not on farming," the Lampasas County resident said. "If you don't own the mineral rights, you don't really own the land."

Drilling has progressed slowly in Lampasas County because of tough limestone and sandstone shelves, which often begin mere feet from the surface. The terrain in some oil-rich parts of West Texas allows drillers to progress more than a thousand feet in a day. Scully Energy cannot dig much deeper than 350 feet per day in southeast Lampasas County.

"This is probably some of the hardest parts of the state to drill," field superintendent David Cowen said. "I know it's going to be slow and hard."

Scully Energy began drilling the Wynne No. 1 well on Clayton's property Aug. 21, using a rig Cowen built himself. The Salado company originally had trouble finding, and paying for, rigs because of high transportation expenses to an isolated field.

Cowen's three-man drilling crew and four-man piping team has drilled 1,100 feet ahead. Working all day and occasionally at night, crews hope to finish the 3,000-foot well by the middle of September.

Hard geologic formations can prove frustrating, but Lampasas County limestone has its advantages, too, said Cowen.

"Out of all the wells I've done out here, I haven't had a one give us problems with caving in," he said.

Sobehrad acknowledges limits to the oil and gas in Lampasas County reservoirs. Although "everybody's chasing the Barnett" shale formation, which the geologist said will yield the highest gas production in the state, those reserves of natural gas probably will not prove lucrative in Lampasas County, Sobehrad said.

Gas explorers are reaping great profits in North- Central and North Texas but often have to drill as deep as 7,500 feet, which is not feasible at the extreme southern end of the Barnett formation, Sobehrad explained. Scully Energy will use vertical wells in contrast to Barnett shale drillers, who use only horizontal wells.

"I don't believe horizontal wells are needed in this area," Sobehrad said, calling the structures "extremely expensive."

The geologist also believes Lampasas-area drilling will center almost exclusively around Big Divide Road and the Lampasas County/Coryell County line. Researchers have studied wells farther north of Copperas Cove but don't see much production potential, he said, and Sobehrad believes formations west of Kempner are too shallow to hold significant reserves.

"I think it's going to be contained within 20,000 to 30,000 acres right around where we're drilling," he said.

Miller said many landowners he has approached, except longtime Lampasas Countians who remember drilling in the mid-20th century, initially expressed surprise when they heard of oil and gas exploration plans.

"Some of them probably think we're stupid," Miller said.

Scully Energy and its associates continue educating potential lessors about the promise of reservoirs in and around Lampasas County, however. Explorers also believe earlier projects may have stalled mostly because of poor profit outlooks, not because of insufficient oil and gas reserves.

Now, just as drilling equipment is in place, research and high energy prices have prepared workers for the big discovery Scully Energy anticipates.

"Everything's up and running now," Cowen said, eyeing the derrick on Clayton's property. "It's good to go."